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Options IFRS and US GAAP, Essay Example

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The benefit/ drawbacks of recognition of options IFRS and US GAAP

IFRS is classified as globally recognized as it is going stronger and growing every year and appealing to other countries. IFRS board embodies diversity by having members from different countries who bring new opportunities to the organization. In addition to the board’s diversity, IFRS embodies clear understanding and effective communication. There are some countries that are slower in adopting IFRS standards because different concepts of raising capital might not appeal to other countries. Authors and professionals have stated the benefits and drawbacks of adopting IFRS.

Benefits	Drawbacks
§ The reactions from most countries have been positive in the movement towards IFRS adoption ( )	§ IFRS may not satisfy the countries’ accounting standards and impact the regional differences based on economics. This can lead to differences in domestic accounting standards. (Armstrong, 2008).
§ IFRS has improved transparency through reducing calculations and preparation of accounting numbers ( )	§ According to the author “IFRS would lead to an increase in the exercise of opportunistic managerial discretion when applying IFRS” ( Armstrong, 2008 )
§ It lowers the costs of comparing firms financial position and performance across different countries (Armstrong, 2008 )	§ “A country essential allows a foreign with no local accountability to dictate reporting laws” ( )
§ IFRS adoption would allow European capital market to potentially become more globally competitive due to increases in liquidity for European firms ( )	§ There were 100 groups of finance directors and ICAEW criticizing the IASB approach of the structure of “complexity, introduction much subjectivity and compromised comparability” ( )
§ The recent news from IFRS shows more support from the world bank for companies that use IFRS standards. (IFRS)
§ IFRS can show economic gain by overcoming countries’ differences in financial reports and promoting international trade.
§ There are 27,000 domestically listed companies in 88 major stock exchanges where 15 of 20– G20 economic require the use of IFRS standard (IFRS)

From my point of view, the US is the strongest country in the world on an economic basis. The US follows US GAAP accounting guidelines, which shows their determination and stabilities in achieving its goals and keeping their standards at a high quality. However, the downfall is that more countries are going towards IFRS. This can create scope of competition between both standards as countries like Canada are considering their options towards IFRS. In contrast, other sources have published other perspectives of IFRS and expressing their views as stated.

Benefits	Drawbacks
§ A recent independent body stated that the preparation for FASB does tackles issues surrounding the adoption of US GAAP the United States ( )	§ It shows that 70 % of the companies from 2004 to 2006 do have a higher return on equity under the IFRS as compared to US GAAP reconciliation for non- US companies with securities listed in the united states. ( )
§ US GAAP is a well- established organization as FASB has been there for over 40 years, and the inputs from formers and recent FASB have helped in developing financial reporting, and more importantly, its role was to outgrow challenges in the future. This does show (FASB)	§ Based on Researchers Holger Daske, Luzi Hail, Christain Leuz and Rodrigo Vergi inspected 3,100 firms from 26 countries that sought to adopt IFRS (Bolt, 2009)
§ Us GAAP uses the last in first out (LIFO) method, by use of this method does lower the gross profit, which does allow the company to be taxed less (Yoon, 2009)	§ Financial reporting Improvements will be minor due to US GAAP high standards. ( )
§ US GAAP is significant at the moment domestic markets in the US as investors suggest this standard helps the most accurate and highest quality standard for its external users (De Gennaro)	§ When choosing an accounting standard, firms from 17 countries listed in London that voluntarily adopted either IAS or US GAAP are more likely to choose IAS when listed in any capital markets issuing equity. (Burnett)

The future of IFRS and the possibility of the US adopting the IFRS as their reporting framework for entities

There is a possibility that the US has reached the level of full potential in adopting the IFRS and converted all their reporting framework and standards. If FASB and IASB have fully been enjoined, making the country achieve completion in the convergence of IFRS and US GAAP. The convergence allows and permits the domination of the US domestic issuers/ companies in the global market. However, before adopting IFRS, sources such as Ervin. L black from JIAR conference issues was addressed. The address regarded IFRS to have obstacles because it creates a significant difference between countries in aspects of institutional, legal, economic, and cultural systems (black, 2012). The differences are understandable because every country operates differently and speak different languages. Despite the differences, all countries should unite and ascertain the accomplishments of their goals and the radar of profitability and success.

However, at the moment, both FASB and IASB have been working out for over ten years to achieve a single set of the globally accepted standard is a questionable matter not efficient enough. Where areas that can prevent IASB and FASB from working together, as Alex Bogopolsky pointed is judgment, opinion, and interest can be divide because FASB prefers to generate very specific reporting rules. In addition, the political side needs to be looked upon as it not just technical of the accounting area, but there is a lack of consistency, and it is questionable if the US will allow the authority of IASB. ( Bogopolsky, 2015). In addition, it can be costly because the transition costs for US companies will be over $8 billion ( Jardon, 2013).

The reluctance of the US to accept IFRS is acceptable for accounting reasons. On the other hand, the beneficial convergence of the United States GAAP with IFRS has a significant impact on parties such as investors and the government to understand for a single set of financial statements, which means fewer work materials to produce. Also, in addition to multinational enterprises, large public entities, and even the government can produce a simplified form of the tax system for all businesses switching under IFRS. ( lam, 2015).

As Hester Lam pointed out, “switching to IFRS would ensure reliability, or at least be clear on the nature and magnitude of the differences.” In conclusion, the most beneficiary of adoption of the standard would be the World Bank, as it would be easier to follow the standard and benefits employees to travel and work aboard, as big clients would follow IFRS standards.

My opinion of the system of The US GAAP is that it can prevent tensions of replacing the right or choosing the right candidate for the SEC chairman, as there are issues on this matter for many years of commitment and amendment of strict rules-based approach and pressures from the standard organization and businesses in the US. Above all, with acceptance of IFRS can be efficient, structured, less strict for the long run, and future prospectus in a show the ability of the world finance and expectations.